Despite all the evidence to the contrary right now I believe it is possible to run a good company. That is, one that can hold its head up high and say it has done the right thing in the course of making money. Equally, I don't think that is common at present. Corporate ethics have been profoundly corrupted by the neoliberal cult of greed.
It increasingly looks likely that Ed Miliband made a smart move when tackling this issue at lat year's Labour Party conference. I wrote the following blog then, and I'll repeat it now:
“Ed Miliband has announced himself in favour of good business. I am delighted he has. So am I. It's astonishing that some are saying that by declaring himself against spivs, chancers, asset strippers, speculators and tax avoiders he is somehow anti-business. Far from it: he's declared himself very pro-business precisely because it is these people who are any-business.
But being anti-something is not good enough. Being pro-good business is what is required and that requires a clear understanding of just what a good business might be. I'm not seeking to offer a definitive guide here, but take these as examples. A good business:
1) Makes clear who it is so people know who they are dealing with
2) Makes clear who runs it
3) Makes clear who owns it
4) Makes clear the rules by which it is managed
5) Puts its accounts on public record if it enjoys limited liability, and does so wherever it is incorporated whether required to by law or not
6) Seeks to comply with all regulation that applies to it
7) Seeks to pay the right amount of tax due on the profits it makes in the place where they are really earned and at the time they really arise
8 ) Seeks to pay a living wage or more to all who work for it
9) Recognises trade union rights
10) Operates a fair pay policy so that the pay differential between highest and lowest paid in the company cannot exceed an agreed ratio that should never exceed twenty
11) Makes fair pension provision for all employees
12) Does not discriminate between employees on the basis of race, nationality, national origin, gender, sexual orientation, age, disability and similar such issues
13) Does not abuse the environment
14) Has a clear code of ethics that it publishes and is seen to uphold
15) Is transparent in its dealings with customers
16) Seeks at all times to minimise risk to those it deals with and takes all steps to ensure they know what those risks are
17) Accepts responsibility for its failings and remedies them
18) Works in partnership with its suppliers and does not abuse them
19) Advertises responsibly
20) Creates and supplies products meeting real human need
I could readily add to that list, which I do not think I have tried to prepare before. But the gist is obvious.
So what would this look like in practice, meaning how could this status be assessed? This was a question I was asked by a councillor last night who wanted to put good ethics into practice in his council's procurement policies.
I hope that the assessment criteria for the above should be clear in most cases with the exception perhaps if the fact that this list clearly implies the need for country by country reporting to explain:
- What it is called where it operates meaning it must name each subsidiary and specify where it operates
- Its profit and loss in each country and jurisdiction in which it operates
- How much tax is pays on the profits it earns in each jurisdiction
- What its internal trading is so that its transactions within its internal supply chains can be identified
- How many people it employs in each jurisdiction that operates in and how much it pays them in aggregate plus their pension cost
- How much it has invested in tangible assets and working capital in each jurisdiction on which it works.
Only then is the data to assess whether it is a good corporate citizen available for assessment.
The final part in this equation is suggesting an assessment criteria for what is a good company. In some cases this will, again, be obvious from the suggestions made. For example, it might be expected that a company either recognises a union or it does not. However things are rarely that simple. Different subsidiaries in different countries may or may not recognise unions so composite scores are possible.
Other indicators can be prepared using this data. For example explainable and unexplainable presence in tax havens becomes an issue when the number of subsidiaries in such places are known. The proportion of trade through or assets in such places also becomes significant assessment criteria if country by country accounting data is available. The likelihood of tax compliance can also be assessed properly when country by country reporting data is available.
‘So what?' might then be the question. What would be the point of all this? Well when things are measured behaviour changes, we know that. But more significantly the government is a major purchaser from many companies. If its procurement policy was based on the requirement that a company meet a minimum standard or no contract could be issued then this becomes a very powerful tool indeed, and those criteria need not be consistent. So, for example, in the case of PFI offshore might simply be a non-starter.
The point though is this: we can identify good companies and the introduction of country by country reporting would make the whole task a lot easier.
What this means is simply this: reform to our currently unacceptable corporate culture is possible. All it takes is political will and we can do it.
Is that will available? That's the question."
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Your excellent guide to what constitutes a good company will be scorned by the “governments” and “regulators” in the Crown Dependencies and Isle of Man.
Some of your list should be routinely incorporated into a company’s “Articles of Association” the remainder are a matter of truth, honesty and transparency — all of little interest to those who hold sway on these forsaken islands.
The on-going revelations of crime and corruption in the UK’s banks will eventually reach the Crown Dependencies — and the façade created by the island’s fraudulent £multi-million PR promotions (which up to now have fooled some of the world into believing that they are wholesome places) will be finally exposed.
It is a bitter indictment of the financial services industry that millions of people have to wait for criminality to be publicly exposed before they can obtain justice.
Surely PSG, you can’t possibly be suggesting you don’t entirely believe Chief Minister Bell when he says, in a newly-published document (quick off the mark as ever):
‘The Isle of Man Government’s commitment to combating money laundering and the financing of terrorism reflects the Island’s position as a reputable centre for international financial services.
‘The Isle of Man is proud of the part it has played in helping the international community to protect global financial systems from those who would wish to abuse them to launder money or finance terrorist activities.’
http://www.gov.im/lib/docs/cso/amlcommitment.pdf
This latest offering from the IOM PR machine was reported yesterday on the isleofman dot com website, but (as has happened before) when I try to include the link my post disappears into the ether. Must be an IOM gremlin at work somewhere!
Well, if the USA system can be hoodwinked by HSBC money laundering division as was disclosed recently, I am sure that IOM obviously have sufficient skilled and experienced personnel running their financial services industry to fully ensure that it would not happen there – or have they?? Teflon works well as a last resort.
Anrigaut
Don’t believe anything that the Isle of Man government says…
It is a crooked as a corkscrew.
A fact that we beleive you are well aquainted with …
Tricky
Justice comes to those who wait and the Isle of Man government will eventually be condemned for the charalatan it is.
Trust us.
PSG
Your belief is well-founded. I presume the tongue-in-cheek nature of my comment was not lost on you.
Richard, last week you drew attention to a report about the extent to which the ‘big four’ second people to all political parties, supposedly to provide ‘expertise’ (although their primary role is actually gathering intelligence – and the report ingnored the role of one particularly influential company – McKinsey).
Given the interest Miliband showed in ‘good’ companies, and the fact that after the G4S fiasco, Barclays, HSBC, etc, much more political capital could be made from following the logic towards what you suggest here, I bet there are some very interesting conversations taking place between secondees and their ‘runners’ back in their home/controlling organisation. They must be absolutely desperate to keep the lid on this, that’s for sure. And one of the main ways to do that is to keep the Tories in power for as long as possible. I hope Miliband, Balls and co keep this in mind when seeking or listening to advice from these secondees.
What does
“20) Creates and supplies products meeting real human need”
mean? Does that mean that companies making films, music, art, computers etc would not qualify. I’m not “trolling” here, I genuinely don’t understand what you mean.
Thanks
Adam
Well let’s start with anything advertised in a weekend colour supplement as not meeting real human need, shall we?
I’m very sorry, but I don’t understand the reference you are making here. Perhaps I’m being dense!
It is a nice list. But as Joel Bakan (professor of Law at University of british Columbia) showed in 2003 and 2004 in his book: “The Corporation, The Pathological Pursuit Of Profit & Power (2004)” (there is an excellent, if packed film of the sdame title) it is not going to happen without massive change – especially in defining what a corporation is FOR.
“Asking a corporation to be socially responsible makes no more sense than asking a building to be.” Milton friedman.
And that is the problem, is it not?
An academic reviewer cuts to the gist of the book thus:
“In his provocative book The Corporation (and movie of the same title), Professor Joel Bakan argues that corporation would be a psychopath. The corporation has become a vehicle by which good men and women cause harm to society because of the way the corporation is created and protected by the law. The book takes the reader through the origin of the corporation in form and legal status. He then parades a tale of terribles indicting the corporation for a variety of evils committed on this earth. The evils range from low wages in the third world, environmental damage, oppressing the masses, a slew of corporate crimes, and many more. He then demonstrates how the corporation has been subverting the democratic process through donations and lobbying. Insidious marketing by corporations does not escape Bakan’s wrath, and he ends by calling for corporate
accountability. He proposes a variety of reforms that he believes will restore the balance of power from corporations back to the people.”
review by Moin A. Yahya, http://www.ualberta.ca/~myahya/Bakan.pdf
And Robert monks wrote this:
“Bakan’s “The Corporation” is one of those rare books that opens up a new world. It’s message is compelling– and more important now than ever. With exquisite historical evocations and incisive contemporary examples, the author challenges us to recognize the flaws inherent in the very nature of the corporation and the practical possibilities for reform. You will want to have the book at hand for frequent reference for many years to come.” –
Robert Monks cited on the official website for the film:
http://www.thecorporation.com/index.cfm?page_id=47
So what is to be done?
“The reason these ideas so clearly articulated by Bakan are so important is because they fatally undermine the TINA (there is no alternative) rhetorical narrative of the free-marketeers.
“They confirm that there is nothing natural about corporations and that they are entirely man-made and as such can be reinvented and redirected if we have the political will to do so.
……………
“The challenge for now is to find ways [for the democratic state] to control the corporation — to subject it to democratic constraints and protect citizens from its dangerous tendencies”
http://notnumber.wordpress.com/2011/01/22/excerpts-from-the-corporation-by-joel-bakan/
So, bearing in mind the Friedman quote above, we have to reedefine what a corporation is for. We have to put the morality / social context back in to the robot machine we have created.
Richard’s list above is a useful starter.
I do not accept that corporations are psychopaths
People are
And that’s what Friedman got wrong
And that’s why change is possible
I am an optimist
Equally I’m a realist – and the required change is, as you say, enormous
We agree with you Richard: it is people who make companies (including giant corporations) and it is these people who establish the “culture” of the company. This culture is created by the leadership at the top and transcends to the bottom pervading every aspect of company life.
Governments are also influential in the way companies behave through feeble regulation and corrupt policing.
Or in other words “There are no bad Indians, only bad Chiefs”